Aggregated earnings before interest, taxation, depreciation and amortisation (EBITDA) of casino companies with exposure to Asia-Pacific (Apac) markets will “fall around 70 percent in 2020 before a gradual recovery in 2021,” due to the impact of Covid-19, suggests Moody’s Investors Service Inc.
The forecast covers nine listed gaming entities – or associated financial vehicles – with Asia-Pacific operations on which Moody’s publishes credit ratings. They are: Genting Singapore Ltd. Genting Bhd, Crown Resorts Ltd, Las Vegas Sands Corp, Melco Resorts Finance Ltd, MGM Resorts International, Wynn Resorts Finance LLC, NagaCorp Ltd, and Studio City Finance Ltd.
The institution noted in a Wednesday memo that all nine firms had been assigned a ‘negative’ outlook.
But Moody’s noted that while leverage of the group was likely to remain “elevated” due to the crisis, most “have sufficient liquidity to meet basic cash needs over the next 12 months”.
The institution added: “These companies have sufficient cash equivalents and committed facilities to withstand temporary cash burn, which includes operating expenses, interest payments and maintenance capital spending, as well as meet their debt repayments in 2020.”
The best of the bunch, Genting Singapore, operator of the Resorts World Sentosa gaming complex in Singapore, had an ‘A3 negative’ rating assigned by Moody’s for its long-term financial obligations. That meant such obligations were within the upper-medium grade and subject generally to low credit risk, according to Moody’s ratings guidelines.
Nonetheless the firm is dependent on a single market for its operations, and casino operations have been shuttered since the early hours of April 7 as part of Singapore’s so-called “circuit-breaker” measures to stem the spread locally of Covid-19. Some dine-in facilities are reopening at the resort, the firm said last week.
Two of the nine covered operators with Asia-Pacific operations that are considered to have the least robust outlook, have ‘B1 negative’ ratings from Moody’s. That means they are in a category considered speculative and subject to high credit risk.
They were: NagaCorp, a Hong Kong-listed operator with a monopoly in Phnom Penh, Cambodia; and Studio City Finance, associated with the Studio City casino resort in Macau, a venue majority owned by Melco Resorts and Entertainment Ltd.
“Studio City Finance’s liquidity may run out in less than a year,” noted Moody’s in its memo.
Hong Kong-listed Melco International Development Ltd, parent of Melco Resorts, confirmed in its annual report filed in late April that work had “begun” for phase two of Studio City.
Studio City Finance and NagaCorp are each tied to a single market for the underlying business operations that directly support their financial obligations, although NagaCorp says it is developing a casino resort at Primorye in the Russian Far East.
Macau had only a 15-day pause in February due to Covid-19, but since then its tourism numbers have slumped, along with its casino gross gaming revenue.
Moody’s observed that NagaCorp on Monday had proposed issuance of US$300 million in notes, with proceeds to be used to refinance its bond maturing in May 2021.
NagaCorp had said in a filing that if the exercise went ahead in that form, the group would afterwards have approximately 18 months of operational liquidity, even if it remained in a “minimal revenue” business environment.
Gaming at the site has been suspended since April 1 on the orders of the national government, as part of measures to prevent the spread locally of the novel coronavirus responsible for Covid-19 infection.
On Thursday, NagaCorp said in an update filing that the offer had been agreed with assistance from three banks, and had been upped to US$350 million. It would provide the firm with just under US$337 million after deduction of expenses, added the Thursday announcement.
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